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4 ) S . Bouchard and Company hired you as a consultant to help estimate its cost ofcapital. You have obtained the following data: Do

4) S. Bouchard and Company hired you as a consultant to help estimate its cost ofcapital. You have obtained the following data: Do = $0.85; Po = $22.00; and g =6.00%(constant). The CEO thinks, however, that the stock price is temporarily depressed, and that it will soon rise to $40.00. Based on the DCF approach, by how much would the cost of equity from retained earnings change if the stock price changes as the CEO expects?

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